ANALYSIS: LogiCor invests over €1bn in European logistics in 1H of 2014

LogiCor, the European logistics platform of US giant Blackstone, has invested more than €1bn in six European logistics deals in the first half of the year, double what it invested last year, a Blackstone spokesman told PropertyEU this week.

Earlier this week, LogiCor acquired six properties from Pramerica Real Estate Investors in the CEE region for around £120 mln (€150 mln).The 200,000 m2 portfolio – in Poland and the Czech Republic - includes Panattoni Parks at Prague Airport, as well as in Czeladz, Krakow, and Gliwice. Tenants include Amazon and UPS.

The deal came just days after LogiCor’s acquisition of SEB Asset Management’s entire logistics portfolio, comprising 18 assets, for €275 mln. The ‘Curve’ portfolio, as it is known, totals 434,300 m2 across eight countries, including Spain, Germany, the UK, France and the Netherlands. The average economic occupancy rate is around 85%, with an average remaining lease term of 3.8 years. Transfer of ownership is expected to be completed in the second half of 2014.

Also, in March, LogiCor acquired a 750,000 m2 logistics portfolio in France and Germany from Foncières des Régions in France for around €473 mln. As such, the deal was a similar size to the acquisition by Canadian pension fund PSP and the UK’s largest publicly traded owner of industrial properties, Segro, of a €472 mln logistics portfolio from Tristan and AEW in Germany, Poland and France in February. In addition, LogiCor acquired a 200,000 m2 portfolio of logistics properties in Poland from UK-based Standard Life Investments’ Select Property Fund for €118.2 mln in May.

The swath of deals reflects Blackstone’s ‘appetite for logistics’, according to Tim Crighton, co-head of EMEA industrial and logistics at Colliers in London. ‘LogiCor has been on this road for the past 18 months (since Mo Barzegar joined as President and CEO in January 2013) and clearly has a desire to grow,’ Crighton said. ‘I think it’s conceivable at some point that LogiCor will become a stand-alone entity.’

IPO ON THE CARDS
Richard Laird in the UK-based European logistics investment team at Knight Frank agrees. ‘I think that once LogiCor has enough scale – several billion euros of assets – it will think about an IPO. It has bought very cleverly.’

To date, LogiCor has amassed a 5 million m2 European logistics portfolio. The unit’s pan-European logistics strategy also mirrors the typical investment strategy of Crighton’s clients. ‘Most of our clients don’t look at country borders but at good investment opportunities and value. The UK market remains popular but slightly higher yields in continental Europe are also attracting investors,’ he added. Typical prime logistics in the UK are around 5.5%, compared to around 6.5% in Germany and France, according to Colliers.

The spread between yields and borrowing is also enticing investors, according to Laird at Knight Frank. ‘You can get yields of around 7% on some logistics assets and borrow at 3.5% - that’s a lot of arbitrage,’ he said. ‘Investors see logistics as an asset class that’s defensive and very yielding. Debt is quite cheap and becoming more available.’

LogiCor was founded by Blackstone’s real estate unit in 2012 to manage and operate its European logistics assets, following the success of its US equivalent, IndCor Properties, which was founded in 2010. Investors have speculated that IndCor could go public this year or next.

During the first half of 2014, there were €6.5 bn of logistics and industrial deals across Europe, according to RCA. This compares to €17.3 bn for all of last year. However, the deal volume is currently being held back by lack of supply, not demand, said Laird. ‘We would expect total volumes for 2014 to be up on 2013 with several large sales and portfolios planning to come to market later this year,’ Crighton added.

As demand increases, investors may also have to look at alternative options when it comes to logistics acquisitions. Off-pitch locations, such as light manufacturing, where there is long occupier commitment due to the capital invested in the site and plant and machinery, could be a good investment option. ‘To date, we've seen demand restricted to prime locations and mainly to the 'big box' warehouse sector, but investors may be forced through necessity to look at more creative options or future growth areas to meet their target returns,’ Crighton said.

Sara Seddon Kilbinger
Correspondent Germany